Superstores could have just five more years on top

Data from industry body IGD lays bare the pressure on the “big four” supermarket chains' superstores

Data from IGD says sales from supermarkets and hypermarkets will fall by 4pc over the next five years Photo: PA

Superstores are losing their grip as the dominant destination for grocery shopping in the UK, with sales from convenience stores, discounters, and the internet likely to be larger within five years.

According to new data from industry body IGD, which lays bare the pressure on the “big four” supermarket chains, sales from superstores and hypermarkets will fall by 4pc over the next five years despite a 16pc rise in overall grocery sales.

This means that, for the first time, sales from convenience stores, discounters and the internet will overtake superstores and hypermarkets by April 2019.

Sales from discount chains such as Aldi and Lidl are forecast to double over the five years – giving them a 10.5pc share of the grocery market – while online sales will grow 119pc. Convenience stores such as Tesco Express and Sainsbury’s Local will increase by a third, according to IGD.

Joanne Denney-Finch, chief executive of IGD, said: “People are now more willing to shop around at different types of grocery formats, such as convenience stores, discounters or buying online. They have more options available to them than ever before.

“Shoppers now expect grocery retailing to organise itself around their lives rather than building their routines around store opening hours. They expect to buy whatever they want, anytime, anyplace in the most convenient way to them.”

The rise of convenience retailing, the discounters, and online shopping is putting an unprecedented strain on Tesco, Asda, J Sainsbury and Morrisons.

Shares in Tesco, Britain’s biggest retailer, are at the lowest level for a decade and earlier this month it posted its worst quarterly trading update for 40 years.

At the company’s annual meeting last week, Philip Clarke, chief executive, pleaded for more time to turn the retailer. He said Tesco was undergoing “radical” changes as it seeks to adapt to the changes in shopping patterns.

The company is attempting to revamp its hypermarkets by installing Harris+Hoole cafés, Giraffe restaurants, and larger clothing departments. Mr Clarke has said he wants to convert Tesco’s biggest stores into “retail destinations”.

According to IGD, sales from superstores and hypermarkets will fall from £73.7bn this year to £70.8bn in the year to April 2019.

This would see their share of grocery sales decline from 42.2pc to 34.9pc, although they will still be the biggest single source of sales.

At the same time, sales from convenience stores, the discounters, and the internet will grow from £55.9m to £87.3m.

This would mean that in April 2019, discounters account for 10.5pc of grocery sales and online retailers 8.3pc, while convenience stores are established as the second biggest source of grocery sales with 24.1pc of the market.

Sales from small supermarkets – those ranging from 3,000 sq ft to 25,000 sq ft – are predicted to be flat over the next five years.

Ms Denney-Finch said the leading retailers need to “rethink” how to use their biggest stores.

She said: “While most food and groceries will still be bought at larger supermarkets and hypermarkets in five years, they are becoming less popular.

“So there needs to be a rethink on how to best use the space and we’ve already seen the reinvention of some hypermarkets offering additional services, such as restaurants and gyms.

“There’s also been more investment in making the shopping experience more inspiring and user-friendly.

“This, for example, includes using digital technology to send personalised offers to people’s smartphones when they’re in-store and telling them where in the shop the items are located.”

The “big four” are trying to offset the decline in large supermarkets by investing heavily in convenience stores and their online services. Sainsbury’s has also revealed plans to move into discount retailing by relaunching Netto as a joint venture.

However, Aldi and Lidl are accelerating their expansion plans. Lidl, for example, has pledged to double in size over the next decade and last week announced it was creating 2,500 jobs this year.